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LONDON--(BUSINESS WIRE)--Asia Pacific budgets are set to outstrip USA and Canada by 2021, fuelled
by an explosion in global arms trade that threatens the competitive edge
and dominance of US, UK and European defence trade according to the
biggest budget and export study since the economic downturn. The study – The
Balance of Trade – is presented to clients on 25 June by IHS Inc.
(NYSE: IHS), the leading global source of information and analytics.

1.

Asia Pacific’s defence budgets are forecast to outstrip North
America by 2021, up 35 percent from 2013 levels to $501bn. Total
global defence budgets are forecast to continue rising, reaching
$1.65tn by 2021, an increase of 9.3 percent over 2013 levels.

2.

Israel will sell twice as many UAV (‘drone’) as the USA in 2014 and
will become the biggest exporter by the end of 2013. The top UAV
(‘drone’) exporter is currently the USA not Israel (despite press
reports).

3.

Global arms trade (exports and imports between countries) is up
significantly despite the global economic downturn, increasing 30
percent between 2008 and 2012, from USD56.5bn to USD73.5bn. At this
rate, defence trade between countries will have more than doubled by
2020. The global defence export and services market will have
reached $100bn by 2018. IHS analysis suggests that world trade is at
least 30 percent higher than as stated in other prominent studies
publicly available. Western Europe’s share of exports declined, Asia
Pacific’s rose.

4.

Asia Pacific’s exports are up. Western Europe’s exports are down.
Western Europe’s share of the global market was 34.5 percent in
2008 and fell to 27.5 percent in 2012. Asia Pacific’s share
(including China) rose from 3.7 percent ($2.0bn) in 2008 to 5.4
percent ($3.7bn) in 2012 – with many in Asia doubling exports.
China has jumped up from 10th place in 2008 to be the world’s 8th
largest exporter today.

5.

USA has imported $10.5BN in military related equipment and
services since 2008 – foreign imports to USA are forecast to
continue rising through 2013. Rise of Asia Pacific exports
threatens US dominance of global defence industry.

Guy Anderson, Senior Principal Analyst (A&D), IHS Jane’s, said: “The
global arms market is about to get very turbulent. We may already have
reached ‘peak defence’ with the US dominance of the global defence
market under threat. The big Western defence companies have no option –
export or shrink – but this could be sowing the seed of their own
demise; the opportunities in the East are a double edged sword, fuelling
a trend which threatens US dominance of defence. Low end defence
equipment dominates the global market now but the West’s edge on
technology will erode this decade as Asia outspends the USA and Europe.
However, money alone is not enough. India is proof of that. And size
doesn’t matter. Israel is set to complete its domination of the UAV
(‘drone’) market in 2013. Turkey, Singapore, South Korea and China are
also racing to innovate. Give Asia and the Middle East a decade and they
will be selling world class kit. The US is now buying significant
amounts of foreign imports.”

Paul Burton, senior manager, IHS Jane’s DS Forecast, said: “Two things
are happening: budgets are shifting East and global arms trade is
increasing competition. This is the biggest explosion in trade the world
has ever seen. At this rate, defence trade between countries will have
more than doubled by 2020. China is decreasing imports as it improves
its own industrial capabilities, and while Beijing’s exports have
doubled since 2008, South Korea’s are up 688 percent, putting it into
the global top 20 with $753m. Chinese sales go to Indian neighbours and
low end developing countries or those that have fallen out with the
West. The Middle East is very open to buyers from all over the world,
perhaps more than has previously been acknowledged. Iraq in particular
is looking to East and West sellers. With India, Saudi Arabia and UAE
importing nearly $13bn worth of defence equipment between them in 2012,
it is little wonder that so many companies are focusing their attention
on exporting to those markets.”

USA

USA – Imports have fallen since 2008 making them the 10th largest
import market globally

Exports have increased dramatically by 42.1 percent to $28.5bn and
total market share has increased from 35.5 percent to 38.8 percent.
Most sales come from Iraq, Afghanistan and military aircraft sales

The US government is softening its position on export controls, with
industry-driven export reforms

The USA, UK, Pakistan, Canada and South Korea have all seen declines
in imports since 2008

Canada

Exports have increased by 83% to $1.7 billion and their market share
has risen from 1.6% to 2.5%.

Most of the sales are to the USA

Russia

Exports have increased to $10bn but its market share has remained
roughly the same at 14.8 percent

Russia’s export base for larger defence equipment is under threat,
which is a concern to Russia

Russia continues to pursue its 2020/2025 rearmament target and to
reinvigorate military exports - but massive state funding and reform
efforts have failed to close capability gaps

UK

UK exports rose by 49 percent since 2008 and its market share rose
from 4.8 percent to 6 percent

UK export order books already indicate UK defence exports will be up
by a minimum 25% by 2015

The UK saw its share of global trade rise significantly. Only the
USA’s share of trade grew more, between 2008 and 2012, in total value
$USD

The increase in UK export is driven by military aviation sales to
Saudi Arabia – Typhoon exports to Saudi and Tornado support contracts.

France

French exports rose by 13 percent since 2008, from USD4.0bn in 2008 to
USD4.6bn in 2012

Israel’s exports increased 74 percent to $2.4bn and their market share
has risen from 2.4 percent to 3.5 percent. Mainly with sales to India

Turkey

Turkey has seen the largest proportionate increase in imports since
2008, buying 172% more in 2012 (USD3.3bn) than it did in 2008
(USD1.2bn)

Turkey, Saudi Arabia, UAE and India account for 23.3 percent of all
global imports up from 13.9 percent in 2008

Italy

In 2012, exports rose 57 percent to $2.3bn and its market share rose
from 2.6 percent to 3.4 percent

Italian sales have sold a range of platforms and mission systems to a
very wide range of countries

China

Exports have increased by 92 percent to $2.2bn and its market share
rose 2.0 percent to 3.3 percent

China has jumped up from 10th place to be the world’s 8th largest
exporter since the 2008 downturn

China exports to Bangladesh, Pakistan, Venezuela and others that are
not politically close to the West

Imports fell as China develops its own equipment rather than importing
from Russia and elsewhere

Defence industrialization is at heart of the China’s current Five Year
Plan (2011-2015) driven by global acquisitions, militarization of
commercial technologies and big research and development investment

India

India largest global importer in 2012 (USD5.3bn from USD3.1bn in 2008)

India is widening its sources for military equipment and is not tied
to Russia or other single sources

India, Turkey and the UAE have dramatically increased defence imports
since the economic downturn

India, Saudi Arabia and the UAE remain the largest importers of arms.
India and the UAE are building domestic defence industries but only
India has seen any growth and this remains small

India, Saudi Arabia, Turkey and UAE account for 23.3 percent of all
global imports up from 13.9 percent in 2008

Brazil imports up 87% between 2008 to 2012 (from USD497mn to USD931mn)

Latin American imports up 16% between 2008 and 2012 (from USD3.42bn to
USD3.96bn)

A defence industry rebirth is underway, linked to growing wealth,
social and employment challenges

Internal security issues are a greater driver than external threats in
most markets

Defence industry ties are emerging between South America and
Sub-saharan and South Africa

Brazil’s defence imports doubled between 2008 and 2012

Latin America’s Defence Industry in New Boom

Saudi Arabia

Saudi Arabia second largest importer in 2012 (USD3.7bn from USD1.9bn
in 2008)

Saudi Arabia, Turkey, UAE and India account for 23.3 percent of all
global imports up from 13.9 percent in 2008

UAE

UAE third largest importer in 2012 (USD3.5bn from USD1.6bn in 2008)

UAE, Saudi Arabia, Turkey and India account for 23.3 percent of all
global imports up from 13.9 percent in 2008

Methodology

The Balance of Trade, a study by IHS Jane’s DS Forecast, is
world’s most comprehensive study of government past and future budgets,
export and import since the economic downturn of 2007/8. The study
includes a total 34,000 defence acquisition programmes. It is the only
study to include the full market scope, every market and geography,
individual mission systems, research and development, production and
services. The study is more comprehensive than any other publicly
available but is not shared in full with the general public – used
instead to alert industry, governments and other clients to specific
issues and opportunities. Constant US dollars are used as the base for
the study. Asia Pacific is defined as being India, Pakistan, South
Korea, Australia, Japan, China, Singapore, Taiwan and Indonesia.

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